Dbf1 Db1 Topic: Banks and the Economy For an economy to thrive, there must be a strong banking system. If the banks fail and must be bailed out, it will

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Topic: Banks and the Economy

For an economy to thrive, there must be a strong banking system. If the banks fail and must be bailed out, it will have an effect on the economy.

If people lose faith in the safety and security of financial institutions, what will happen to the U.S. economy?

Db 2

Topic: Annual Reports

All public companies must open their annual reports to the public, which includes lenders and investors. Investors need to know the financial background of an organization before they make the decision to invest their funds. The use of the annual reports will assist them in their decision.

Explain the annual report and the information it contains. Why is the annual report so important to investors? Give two examples and explain the importance of the information.

Db 3

Topic: Ratio Analysis

Ratio analysis is important for a company to keep a close eye on what is happening within their organization. It can bring to attention any weaknesses or strengths that may be evolving. It is important when there is a red flag of weakness that it is investigated to determine what must be repaired to bring it back to the positive.

The information used in ratio analysis comes from the financial statements, and if that information is not true to what is really happening, this will result in erroneous ratios being analyzed. When performing a company analysis, you have to assume that the given information is true and correct. If it is not, this could affect the company’s bottom line.

Discuss at least three limitations of ratio analysis.

Db 4

Topic: Basic Time Value of Money

It is a common fact that many lottery winners are “broke” sooner rather than later. If you won a $1,000,000 lottery, would you want to collect the lump sum winnings today or receive the monies over time? How does your decision influence the ultimate amount of cash you will collect? Explain the TVM factors you would consider as you make this decision.

Db 5

Topic: Annuities and Loans

Treasury bills and Treasury notes are an investment security issued by the U.S. government. A Treasury bill matures within 1 year, and investors typically roll over the matured Treasury bill and purchase another Treasury bill the same day. Treasury notes have maturities of up to 10 years.

You are considering investing $50,000 in a Treasury bill that you will renew every 6 months or a Treasury note that you will hold until maturity. Your investment time frame is 9 years.

Current investment opportunity interest rates are 5% and are expected to increase to 7% in 6 months. Would you invest in the Treasury bill that you can roll over every 6 months and reinvest in, or leave your money in the Treasury note that will mature in 9 years? Discuss your reasoning.

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